Nigeria’s FX reserves seen falling below $30bn, prompting another rate hike

By bne IntelliNews December 17, 2014

Nigeria’s gross foreign exchange reserves will likely drop to below $30bn by the end of June next year if the oil price trend continues below the $65 per barrel, according to analysts at Lagos-based financial services group BGL, quoted by THISDAY daily. As at December 15, the country’s FX reserves stood at $35.4bn, some $4bn below their level in August, when the naira was hit by the oil price slump, prompting the central bank to use its hard currency stocks to defend it. The

Last month, Nigeria’s central bank devalued the naira by 8%, as well as raised its monetary policy rate by 100bps to a new a record high of 13% in a bid to stop the depletion of FX reserves. However, the stock of FX reserves has narrowed 4.2% since November 25, when the package of measures was announced.

BGL analysts believe that the continued depletion of FX reserves and the threat it poses to macroeconomic stability will trigger a further rate hike to 14% next year “regardless of the pro-growth and pro employment stance” of the central bank governor.

The current level of Nigeria’s external reserves provides approximately 7 months of imports cover, but pressure is remaining in view of the falling oil prices, which considerably reduce the build-up of FX reserves, and capital outflows related to the expected rate hike in the US. 

Related Articles

Russia's Rosneft sets foot in Mediterranean with $1.125bn Eni deal

Russia's largest oil producer state-controlled Rosneft has acquired 30% in the largest natural gas field in the Mediterranean from Italian Eni, the company announced on October 9. Rosneft that ... more

PetroSA, Rosgeo sign $400mn oil and gas exploration agreement for South Africa

South Africa's national oil company PetroSA and Rosgeo, the geological exploration company of the Russian Federation, have signed an agreement on a $400mn oil and gas development project in South ... more

South Africa’s MTN to invest $350mn in Iranian broadband

South Africa’s MTN said it has agreed, on a non-binding and preliminary basis, to invest an initial $350mn into Iranian fixed broadband provider Iranian Net. The investment will give ... more

Dismiss